No, hobbyists shouldn’t get Universal Credit

Window cleaner © Getty Images
Self-employment should be “organised, developed, regular and in expectation of profit.”

Universal Credit to slash benefits for the self employed.” So claimed a headline in The Observer at the weekend. True or not true? That rather depends on how you define self employed.

You are able to claim Universal Credit (UC) if you are “gainfully self employed”. This means that your main income is self employment, you earn something from that self employment and your work is “organised, developed, regular and in expectation of profit.” If all this is so, you are not required to look for formal employment and you can “concentrate on growing your business and earnings”.

The catch, however, is that at some point your business has to actually make you some money.

During the first year of being self employed, the assumption is that you might not make as much as you would if you were working for someone else in a low paid job wage (striking out alone can be tough) – so you get your income topped up to the appropriate UC levels with no trouble. However in year 2, things change.

The system assumes that you are making as much as you would on the national living wage and only tops you up to UC levels beyond that amount (known as the minimum income floor or MIF). You are effectively assumed to be making at least the minimum wage.

This makes sense. It’s good (and quite right) that the taxpayer is prepared to step in to help people setting up new businesses for a year. But, as a spokesperson from the DWP points out, the system is “not designed to prop up unviable businesses”. I suspect also makes sense to most other people.

If, after many months of effort, you aren’t able to make as much from your self employed work as you would working for someone else, is your business viable – and are you gainfully self employed? And if it isn’t, and you aren’t, why should the taxpayer continue to top up your income to levels much higher that they would if you were classified as unemployed with a great hobby?

You can argue about the timeframe (would two years be better as a start-up period?) and about how UC can work in the long term with the gig economy, but not really with the principle. There is a difference between being self employed and being gainfully self employed.

  • Ally41

    I used to work for a bookkeeper and I can assure you, there are many people who work full time for less than minimum wage. Labourers, decorators, gardeners, hairdressers. These are not hobbies, they are vital community services.

    • AAJ

      You/we should pay them more. They should get minimum wage. Otherwise other tax payers are simply subsidising your decorating work.

      • Maddy Elruna

        The minimum wage is not a liveable wage.

  • mombers

    Intrusive big government welfarism at its worst. What a waste of time and resources, a basic income would sort this nonsense out.

  • Steven Dixon

    The Government didn’t mind taking the accolade for the rise in self-employment,now they are refusing to help them

    • AAJ

      The present government is very much against small businesses, period.

  • Glass Beach

    there was a tv programme aired in the past couple of years (I forget its name) which highlighted a growing number of Eastern Europeans setting up self-employed hobby-businesses here specifically to use the benefits system top-up and also to claim child benefits for their children back in their home countries. benefit policy in this article looks designed to clean up this issue and rightly so

    • AAJ

      Of course Eastern Europeans on average are less likely to claim benefits in the UK than UK people … So, one would hope the TV programme highlighted the Eastern Europeans’ terrible record for such hobby businesses in relation to UK workers who are far better at milking the system

      • Leonard Hall

        Where do you get you information from.
        Eastern Europeans have the highest rates of disability, with 22.5% claiming a disability.
        33% of Eastern Europeans in Great Britain had no qualifications in 2004, which is the highest rate of any ethnic group
        (This is according to UK Government statistics)

      • Glass Beach

        this is highly orgnaised corruption run by gang bosses. the ‘workers’ in the programme drove around in an old Transit (fully legal of course) collecting old bikes, washing machines etc for a couple of mornings per week. the items were then weighed in at a scrap merchant, the ticket from which was used as proof old self employed income. from this they then used the benefits system to take an income, claim housing and child benefits. the government rightly needs to shut down this benefits scam regardless of where the people originate

  • FriarStuck

    If property prices and rents weren’t so high (due to endless government meddling and intervention), nor regulations so onerous, creating new businesses would be easier, but this isn’t the case so the government has to interfere yet again.

    The ridiculousness of it all, is that we’ve done this in Britain before, and it caused the same problems back then, as it does now, namely that it exacerbates the problem of wages not meeting subsistence:

    https://en.wikipedia.org/wiki/Speenhamland_system

    It took 40 years nearly to get rid of that system, given that the state in the UK is basically bankrupt, and they’ve destroyed growth with their meddling (the figures that now report GDP and inflation numbers are so manipulated as to be useless), this absurdity cannot last as long.

  • Maddy Elruna

    So why are so many of the big corporations using tax payers to top up their wage bills? housing benefit & tax credits go to many, many full time workers. If a big corporation expects government help why not the self employed? The real issue I have with UC is the month at a time calculation. Many businesses have better months, and worse months. some months they pay have high costs, and then make more money the month after. UC is a horrible, horrible, punitive system.

    • disqus_x5UmkDRb7H

      Your complaint would not be fixed under any other current benefit system. In fact, it would be worse. If your income fluctuates under JSA, you have to sign off and back on again, a waste of claimant’s time and the DWP/UK’s resources. My understanding is that UC flexes on income, so if outgoings are lumpy, net income would be lumpy.

  • Sheena Maddock

    “And if it isn’t, and you aren’t, why should the taxpayer continue to top up your income to levels much higher that they would if you were classified as unemployed with a great hobby?” Because you would be classed as unemployed and claim full UC as well as having a hobby that makes an undeclared income – all in cash. That would increase the govs unemployment figures and increase the Housing Benefits level of UC, that’s just for starters. Many SE people can’t and never will reach the MIF every month, but will be at least partly self supporting. A definition of ‘much higher’ would be great. I don’t of anyone who is SE and has an income level topped up to ‘ much higher that they would if you were classified as unemployed with a great hobby?’ Can the author please give a reference to where this information came from?